Unwise, oppressive to workers and the poor!

The best politicians know only too well to be careful what they say today, for fear it comes back to bite them tomorrow. That is why they seldom deal in concrete terms, why their statements are nearly always conditional, and why they are likely to be dismissed by headline-hunting reporters as bores. (Witness Philip J. Pierre, arguably our most successful politician . . . but that’s for another show.)

By all the available evidence, as far back as 2002 the current prime minister had been familiar with the operational details of the VAT and by 2004 had already made up his mind about its usefulness. While the other OECS territories had gone ahead and implemented the “inevitable” tax regime, in Saint Lucia, for one politically expedient purpose or another, it was more than once postponed, consequences be damned. And now the chimera is at our throats, its serpentine tail poking us where the sun don’t shine.

In his 2003 Budget address Prime Minister Kenny Anthony acknowledges receipt of a report (commissioned by the ECCB’s Monetary Council of finance ministers of member states and prepared by Sir Alistair McIntyre) recommending—as a direct consequence of their having subscribed to WTO arrangements that would shrink their tax base on imported goods and services—OECS governments should move to a value added tax.

Nearly three years later, the same prime minister had made the following declaration during his 2006 Budget presentation: “The Commonwealth of Dominica introduced VAT on March 1, 2006, with minimal disruptions in business activity. The governments of Antigua & Barbuda, Grenada, St. Vincent & the Grenadines have announced their intention to introduce a VAT-based system. Mr. Speaker, you may recall that we commissioned a group of citizens to review the report produced by the Tax Commission . . . I am pleased to announce that the review has been completed and that the government will soon be in a position to release the report for public scrutiny.” There was no further official word on the issue, except the prime minister’s undertaking to consider “the matter of tax reform after the elections.”

The 2006 general elections having removed him as prime minister, it would appear Kenny Anthony underwent an attitudinal transformation reminiscent of Paul’s conversion on the road to Damascus. At Budget time the now opposition leader recalled that on the campaign trail the new government had accused him of lacking the political will to introduce the value added tax. “Never mind what was said before,” he observed, “promise and reality are now juxtaposed, and nakedness exposed.”

Pounding his fist on the table before him, he said: “For the record, the SLP government was never convinced that VAT was the right way to go. Never! We never took a decision on VAT. You will never see a record that we agreed to VAT. Indeed, we never gave the Monetary Council any commitment to VAT and the reason, among others, was clear: we felt that the Monetary Council had no business in fiscal policy.”
Moreover, even though he had commissioned a special review of the McIntyre report, “we never gave the tax commissioners any commitment to introduce VAT; we just listened to them. We were never persuaded that VAT was the wisest choice because we believe it is potentially an oppressive tax. It is oppressive to the poor, it is oppressive to workers and wherever VAT has been introduced . . . one thing is certain: your retail prices jump, especially the price of food.”
As for there being a positive side to the VAT, the then Leader of the Opposition insisted that Prime Minister Compton was “again proceeding on the wrong foot” when he said “the VAT will remove nuisance taxes.”

Additionally: “When the Minister of Finance tells us he is going to introduce a VAT that is revenue neutral, he should not be so ingenious. All of us know the sole reason to introduce VAT is to spread the [tax] burden. But more importantly there is the bottom line: to raise additional revenue. So what revenue neutrality are you talking about? It is naked taxation to raise additional revenue.”
Finally: “The Minister of Finance will have to tell the people whether consumers will have to pay VAT on their water bills, as in Barbados, Jamaica and elsewhere. He will have to tell Saint Lucians whether at every restaurant in this country, Rodney Bay, Castries, Micoud, or Vieux Fort and Laborie they will have to pay VAT on their sandwich or meal. He will have to explain to the
market vendor whether
when they sell to a tourist or local they have to charge VAT and remit it to the government.”
With the return of the Kenny Anthony administration last December, the prime minister experienced still another rebirth. On March 29 he announced that VAT was on its way and would arrive on September 1, 2012. Its introduction would “fulfill undertakings given to the international institutions by the former government that VAT would be introduced during this financial year.”
Without even a passing reference to his earlier commissioned review of the McIntyre report, the prime minister said in his press release that Saint Lucia had “no other choice.” As for Stephenson King’s reported undertaking, this is what the then prime minister had said in his final Budget address before the 2006 general elections: “I wish to reaffirm the commitment of this government to its implementation by April 2012—mindful of the socio-economic responsibilities of the government.”
Asked recently to explain the caveat, King said: “I was always mindful of the economic meltdown and its multiple effects on the people of this country, the poor in particular. If it came to choosing between postponing more misery for our people and postponing VAT, I was ready to side with the people and take my chances with the institutions. I would postpone the VAT in the best interests of already over-burdened Saint Lucians.”
Meanwhile, Dr Anthony has assured the nation that the VAT Implementation Unit is currently finalizing arrangements for the introduction of the tax: “While a considerable amount of work has been undertaken by the unit in engaging various stakeholders in consultations and educating the general public on the characteristics of a VAT, the work of the unit will intensify in the coming weeks with a view to ensuring the business community and the public in general are provided with all relevant information and are adequately prepared for the change in the tax regime.”
More to the point: As important as is public information concerning the VAT’s “characteristics,” even more important, perhaps, is the official machinery to guarantee its proper administration.
How prepared is the government to handle the VAT and all its attendant problems? More on that next issue.